The Automatic Stay
After filing for Chapter 12, the debtor is given what is known as an “automatic stay,” which halts all creditor efforts to collect debts owed to them and also places a stop on foreclosure or repossession efforts — at least temporarily. The appointed bankruptcy trustee will, within 21 to 35 days after the petition is filed, schedule a meeting of creditors, which the debtor must attend
Creating a Repayment Plan
The debtor has 90 days from the date of filing to propose a repayment plan. The plan must allocate all “disposable income” — which is essentially any money left after paying for the basic necessities of living and the cost of ongoing business operations — to pay back creditors. The plan must ensure creditors receive at least as much as they would under a Chapter 7 liquidation plan.
Scheduling a Confirmation Hearing
After the proposal is submitted, the bankruptcy trustee will review it and all supporting documents, and make a recommendation to the bankruptcy court on whether to accept it or seek revisions. The court is required to hold a confirmation hearing within 45 days after the proposal is submitted. At that time, if the proposal is “confirmed” (accepted), the debtor can begin making the proposed monthly payments to the trustee, who will disburse the funds to creditors.
The debtor will be discharged from bankruptcy once the repayment plan is completed successfully, but it is important to note that certain debts cannot be forgiven under bankruptcy. This includes most student loans, taxes and fines owed to the government, and child and spousal support payments.
Qualifying for Chapter 12
Though Chapter 12 is earmarked for the “family farmer” and the “family fisherman,” if you own an operation that is run as a partnership or corporation, it may still qualify for the code. For a partnership or corporation to qualify, more than half of the stock or equity must be owned by one family, or by one family and its relatives. The stock cannot be publicly traded.
In addition to the debt limitations mentioned above, those filing for Chapter 12 bankruptcy must receive at least 50 percent of their income from their farming or fishing operations. A husband and wife can file jointly or as an individual, but if it’s an individual filing, the spouse’s income must be submitted as part of the petition.
As with all bankruptcy filings, the debtor must attend a certified credit counseling course prior to filing. Also, if the petitioner has been dismissed from a bankruptcy filing within the past 180 days, he or she cannot file again.